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Corporations and Startups No Longer Strange Bedfellows

Entrepreneurs hold the keys to spark innovation that corporations lack. In 2013, we saw more corporations interacting with the startup community and doing things they have never done before. Why are they doing this?

12/31/2013 03:06 pm ETUpdated
Mar 02, 2014

The words entrepreneur and startup have had a great run of late. A study of Census Bureau data analyzed by scholars at the Ewing Marion Kauffman Foundation has demonstrated that virtually all net new job creation over the past three decades has come from true startups - new businesses less than one year old. New businesses, according to the research, create an average of three million new jobs annually, while existing businesses of any age, type or size, in aggregate, shed a net average of about one million jobs each year, as some businesses fail and as others incorporate technology and become more efficient. In 2013, studies show that 300 out of 100,000 adults created new businesses in 2012. Business creation of 0.30 percent translates into approximately 514,000 new business owners each month during the year. "Young companies or new businesses are the job growth engine of the United States economy," says Executive Vice President at the Financial Services Forum John Dearie.

So it's about time corporations have begun to take notice of the value an entrepreneur or startup can bring to larger companies. Entrepreneurs hold the keys to spark innovation that corporations lack. In 2013, we saw more corporations interacting with the startup community and doing things they have never done before. Why are they doing this? They're doing it because of exploding innovation and 21st century minds, speed and products have left many of them in the dust.

Entrepreneurs on the other hand are very wary to go work in-house at a large corporation. They like the autonomy of their own schedule, their own creations and their own imagination. They do not want to be bothered by red tape, a cubicle and a limit on how much money they can make or a corporate ladder. They want a ping pong table in the office. One of the best entrepreneurs in the history of the United States, the late Ewing Marion Kauffman, once dealt with being boxed in. He began his career as a pharmaceutical salesman only to have his sales territory area cut because his commissions were more than the president of the company's salary. He quit his job and with an initial investment of $5,000 grew his own pharmaceutical company to one with more than a billion dollars a year in sales. He sold his company for $7.1 billion in 1995.

Instead of continuing to look to having to hire entrepreneurs, large corporations are admitting where they need help and pitching entrepreneurs and startup leaders. In Kansas City, during Global Entrepreneurship Week, an event organized by KCnext called Reverse Pitch took place. The tables turned on five of KC's biggest corporations. They pitched real pain points to local innovators and startups the same way entrepreneurs pitch to investors every day. Each company was looking for partners to commercialize ideas or solve problems. The companies included corporate giants such as Sprint, H&R Block and DST, as well as the University of Missouri-Kansas City. One of the biggest surprises was the inclusion of the Kansas City Chiefs from the NFL. The Kansas City Chiefs reached out to the room to help solve their parking problem. On Kansas City Chiefs game days, Arrowhead Stadium effectively becomes the 7th largest city in the state of Missouri. Over 70,000 fans and 20,000 cars each week enter the stadium area. This requires a great deal of ongoing planning. The Chiefs goal is to utilize technology to improve the overall traffic and parking experience for their fans. They reached out to entrepreneurs to explore and help improve their payment processes, parking processes (in and out) and commuter data collection, as well as for ways to improve overall efficiency at Arrowhead Stadium. Can you imagine if a group of entrepreneurs can solve these problems for one sports team? The possibilities to replicate and improve fan experiences throughout the world will benefit everyone.

"Corporations working with entrepreneurs is extremely important to overall innovation. Many corporate leaders understand that innovation comes from inside and outside the walls of the corporation," says KCnext President Ryan Weber. "That's why an open dialogue between the big companies and entrepreneurs is absolutely vital."

Corporations are not only pitching to entrepreneurs, but they're also working with accelerators to create closer relationships with startups. Look no further than Think Big Partners. In 2013, Think Big Partners and H&R Block partnered up on an event entitled "Hackovate Health." Hackovate Health is a health-focused innovation competition designed to identify innovative mobile, online, social and other applications that help consumers navigate the new healthcare landscape. Teams, big and small, competed in a three-month long competition, where ten finalists presented promising ideas, some of which turned into new joint ventures. The Hackovate Health process involved coaching and mentoring from business, policy and investor leaders in the entrepreneurship and healthcare arenas. H&R Block fully embraced a role of working on open innovation and learning from entrepreneurs. Corporations with many shareholders don't want to fail. "We believe we can offer corporations other ways to innovate and give them the ability to explore and work with bright individuals not within their four walls," says Managing Partner of Think Big Partners Herb Sih.

Time Warner, Hershey, Pepsi and Microsoft are just some of the other large corporations that have invested time, money and programming into corporate innovation throughout the United States.

In 2013, corporations moved past the typical short meetups and after work happy hours to truly engage with entrepreneurs and startups in their space and more often on their terms. It's a win-win situation for both entrepreneurs and large corporations to form relationships and interact with each other. Cheers to this emerging trend continuing in 2014 and beyond.